Kriti Nutrients Ltd Management Discussions

Global economy review

OVERVIEW:

In 2023, global economic growth slowed to 3.1% from 3.5% in 2022, with Asia contributing disproportionately despite challenges like a weak Chinese recovery, sustained weakness in the USA, higher energy costs in Europe, and global consumer sentiment dampened by conflicts like the Ukraine-Russia war and the Red Sea crisis. Monetary policy tightening led to increased policy and interest rates for new loans. Advanced economies

saw growth slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024 due to policy tightening. Emerging markets and developing economies also experienced a modest growth decline from 4.1% in 2022 to 4.0% in 2023 and 2024. Global inflation is projected to decrease steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, aided by tighter monetary policy and lower international commodity prices, though core inflation decline is expected to be gradual. The US Federal Reserve raised interest rates significantly, reaching the highest level in over 22 years. Global trade in goods declined by nearly US$2 trillion in 2023, while trade in services expanded by US$500 Billion. The cost of Brent crude oil averaged $83 per barrel in 2023, down from $101 in 2022, partly due to Russian crude oil finding new markets outside the EU and global demand falling short of expectations. Despite challenges, global equity markets ended 2023 positively, with major benchmarks delivering doubledigit returns, driven by declining inflation, a slide in the dollar index, falling crude prices, and expectations of rate cuts by central banks.

Regional growth (%)	2023	2022
World output	3.1	3.5
Advanced economies	1.69	2.5
Emerging and developing economies	4.1	3.8

(Source: UNCTAD, IMF)

OUTLOOK:

Asia is expected to continue to account for the bulk of global growth in 2024-25. Inflation is expected to ease gradually as cost pressures moderate; headline inflation in G20 countries is expected to decline. The global economy has demonstrated resilience amid high inflation and monetary tightening, growth around previous levels for the next two years (Source: World Bank).

GROWTH OF THE INDIAN ECONOMY

	FY 21	FY 22	FY23	FY24
Real GDP growth (%)	-6.6%	8.7	7.2	7.8 E

in core inflation. The nations foreign exchange reserves achieved a historic milestone, reaching $645.6 Billion.

The credit quality of Indian companies remained strong between October 2023 and March 2024 following deleveraged Balance Sheets, sustained domestic demand and government-led capital expenditure. Rating upgrades continued to surpass rating downgrades in H2 FY24. UPI transactions in India posted a record 56% rise in volume and 43% rise in value in FY 2023-24.

H82.66 against the US dollar on the first trading day of 2023 and on 27 December was H83.35 versus the greenback, a depreciation of 0.8%.

In the 11 months of FY 2023-24, the CPI inflation averaged 5.4% with rural inflation exceeding urban inflation. Lower production and erratic weather led to a spike in food inflation. In contrast, core inflation averaged at 4.5%, a sharp decline from 6.2% in FY 2022-23. The softening of global commodity prices led to a moderation

Indian economy

OVERVIEW:

The Indian economy was estimated to grow 7.8% in the FY 2023-24 fiscal against 7.2% in FY 2022-23 mainly on account of the improved performance in the mining and quarrying, manufacturing and certain segments of the services sector. India retained its position as the fifth largest economy. The Indian rupee displayed relative resilience compared to the previous year; the rupee opened at Estimated

at H171.79 Lakh crore, with a growth rate of 7.3%, while nominal GDP was at H296.58 Lakh crore. Non-performing assets in scheduled commercial banks decreased to 3.2%.

Indias exports were expected to reach $900 Billion, with significant increases in direct tax and GST collections. Despite challenges, the agriculture sectors growth was projected at 1.8%. Other sectors, like trade, hotel, transport, communication, and broadcasting, were expected to grow at a slower pace compared to the previous year.

India achieved significant milestones, emerging as the fifth-largest economy with a GDP of US$3.6 trillion and a nominal per capita income of INR 1,23,945. Its stock market grew, becoming the worlds fourth- largest, and foreign investment in Indian government bonds surged.

India maintained its ease of doing business ranking and saw a decline in unemployment to 3.2% from 6.1% in 2018.

GROWTH OF THE INDIAN ECONOMY QUARTER BY QUARTER, FY 2023-24

	Q1FY24	Q2FY24	Q3FY24	Q4FY24E
Real GDP growth (%)	8.2	8.1	8.4	8 E

((Source: Budget FY24; Economy Projections, RBI projections, Deccan HeraldJ

In 2023, India faced a challenging monsoon, experiencing a five-year low in rainfall, with August being exceptionally dry, receiving only 94% of its long-term average rainfall. Despite this, wheat production was anticipated to reach a record 114 Million tonnes in the FY 2023-24 crop year, while rice production was expected to decline to 106 Million metric tonnes due to adverse weather. Kharif pulses production was estimated lower than the previous year due to climatic conditions.The Soybean Processors Association of India (SOPA) reported a revival in soybean meal exports, reaching a record high of 21.33 Lakh tonnes in FY 2023-24 compared to the previous year. This signifies increased global demand for Indian soybean products.

Economically, India saw growth across various sectors. The manufacturing sector output was projected to grow by 6.5%, compared to 1.3% in the previous year, and the mining sector by 8.1%. Financial services, real estate, and professional services were estimated to grow by 8.9%. Real GDP was estimated

Outlook: India withstood global headwinds in 2023 and is likely to remain the worlds fastest-growing major economy on the back of growing demand, moderate inflation, stable interest rates and robust foreign exchange reserves. The Indian economy is anticipated to surpass US$ 4 trillion in FY 2024-25.

Union Budget FY 2024-25: The Interim Union Budget FY 2024-25 retained its focus on capital expenditure spending, comprising investments in infrastructure, solar energy, tourism, medical ecosystem and technology.

In FY 2024-25, the top 13 ministries in terms of allocations accounted for 54% of the estimated total expenditure. Of these, the Ministry of Defence reported the highest allocation at H6,21,541 crore, accounting for 13% of the total budgeted expenditure of the central government. Other ministries with high allocation included Road transport and highways (5.8%), Railways (5.4%) and Consumer Affairs, food and public distribution (4.5%). (Source: Times News Network, Economic Times, Business Standard, Times of India)

imports soyabean and sunflower oil from Argentina, Brazil, Russia and Ukraine. India is expected to purchase 3.2 Million metric tonnes of soya oil in FY 2023-24 compared to 3.5 Million metric tonnes in FY 2022-23. The purchases of sunflower oil are expected at 2.9 Million metric tonnes in FY 202324 compared to 3.1 Million tonnes in FY 2022-23. The carryover stocks between 1.2 and 1.5 Million metric tonnes of soyabean and 1.2 to 1,4 Million metric tonnes of rapeseed

Indian packaged edible oil market review

The Indian edible oil market size reached 24.7 Million tonnes in 2023 and is expected to reach 27.9 Million tonnes by 2032, exhibiting a growth rate of 1.35% between 2023 and 2032. India stood as the worlds largest edible oil importer on account of increased disposable incomes, rising urbanisation rates, changing dietary habits and the growth of the food processing sector.

India purchases palm oil mainly from Indonesia, Malaysia and Thailand and

would help reduce vegetable imports in FY 2023-24.

The edible oil packaging market is pegged to rise from US$ 5,353 Million in 2023 and is expected to surpass US$ 9,336.3 Million by 2033. The Government of India has made the export of all edible oils free except mustard oil without any quantitative ceiling and pack sizes. Such initiatives from the government are likely to boost the exports of edible oil in India in the coming future. (Source: Economic Times, future market insights)

INDIAS POSITION VIS-A-VIS PEER COUNTRIES

Country	Domestic consumption (Mn MT)	Import (Mn MT)	Share of import (%)
China	40.36	13.26	33
EU-28	25.49	9.93	39
India	24.61	13.45	55
US	16.52	4.95	30

The Ministry of Food Processing Industries (MoFPI) organised the second edition of World Food India in November 2023. The event was attended by over 70 Chief Executive Officers representing leading companies in the food processing and allied sectors. Japan and Netherlands hosted knowledge sessions on key subjects such as financial empowerment, quality assurance, innovations in machinery and technology, e-commerce and logistics in the food processing sector.

Indian food processing industry review

Indias food processing market is expected to grow to US$535 Billion by 2025 at a compound annual growth rate of 15.2%. Tier-II and tier-III cities remain the key consumer markets for FMCG businesses as they are mirroring consumption trends in metropolitan cities. Food processing is considered a sunrise sector in India and has attracted foreign direct investment worth H500 Billion (US$ 5.99 Billion) in the last nine years. The contribution of food processing industry to agricultural exports stood at 23% compared to 13% in 2014. India ranked seventh worldwide in terms of agricultural and processed food exports which amounted to US$ 51 Billion in FY 2022-23.

Indias food processing sectors PLI scheme is in operation from FY 202122 to FY 2026-27 at a budget of H109 Billion (US$ 1.30 Billion). The initiative aims to encourage manufacturing in four specific categories: ready-to-cook and ready-to-eat products, processed fruits and vegetables, marine products and mozzarella cheese. Besides, the scheme aims to endorse innovative and organic products from small and medium sized enterprises and providing incentives for branding and marketing initiatives abroad to promote Indian brands in the global market. (Source: India briefing.com)

2022, Foreign Direct Investment (FDI) equity inflow totaling around US$2.55 Billion attracted the Indian food processing sector.

• The Indian government introduced 558 unique identification systems such as kisan drones for crop evaluation, digitisation of land records, nutrients and pesticide spraying in 2022.

The expansive manufacturing complex comprises solvent extraction plants, a vegetable oil refinery extruded protein facility, a lecithin plant, an effluent treatment plant, fluidised bed boilers and an in-house tin and jar packaging unit through automated packing suction. The Companys facilities are ISO-9001:2001 certified and produces an array of products such as soya bean oil, Sunflower oil, groundnut oil and Mustard oil and various other

Government policies

• The government allocated a financial outlay of US$ 1.32 Billion (H10.900 crore) for the PLI scheme for the period of FY 2021-22 to FY 2026-27.

• The Department for Promotion of Industry and Internal Trade estimates that between April 2000 and March

Company review

Established in 1995, Kriti Nutrients Limited is engaged in oil refining and the creation of soya-based products. Renowned for its unwavering dedication to product excellence and customer satisfaction, the company has earned a distinguished reputation among its peers. In Dewas, the Companys state- of-the-art manufacturing facility stands as a testament to its commitment to advanced technology.

• The government undertook agriculture initiatives based on cutting-edge technologies like artificial intelligence, blockchain, remote sensing and Geographic Information System (GIS) technology, drones, robotics and others as per the Digital Agriculture Mission for FY 2021-25.

soya-based products, Nuggets, high protein and health products to fulfill the demand of quality products in market.

In the fiscal year 2023-24, 90% of the companys revenues are derived from domestic sales, while 10% originated from exports. Domestic sales primarily stem from direct consumer transactions, whereas exports are predominantly sourced from enduring business-to-business relationships.

KEY RATIOS AND NUMBERS

Particulars	FY24	FY 23
Turnover (H cr.)	684.36	796.87
Debt-equity ratio	0.06	0.29
Return on equity (%)	29	17
Book value per share (H)	35.22	26.42
Earnings per share (Rs)	9.04	4.15

Financial review

Revenues: Revenue during the year stood at H 688.81Cr,.

Interest and finance costs: Net interest and finance costs stood at H 1.39 Cr. Profit after tax: The Company reported a profit after tax of H 45.29 Cr.

market growth by a significant margin; the quality of its numbers indicates an evolved maturing. For instance, a larger part of its edible oil revenues was derived from the high-priced to reasonably well-priced oil variants; in a planned purchase category, it continues to be among the leading brands prospected by buyers; its

The growth of the retail business represents a notable achievement for the company, particularly given its long-standing presence in the industry. While the branded edible oils market in India typically grows at around 1.35% annually, the company exceeded this benchmark by a significant margin.

The company not only outperformed

products were showcased across a larger number of retail counters in micro-markets; branding spend was increased, translating into enhanced and accelerated offtake; attractive counter space was carved out through a complement of edible oil variants; it continued to extend across contiguous markets.

and wellness products that will see growth in both volume and value.

The Indian economy is driving the narrative of personal consumption. Increasingly, global buyers are looking to reduce their reliance on China by exploring opportunities in countries like India. Indian products are gaining acceptance worldwide due to their world-class quality and service. Moreover, theres a notable shift in the industry from unorganised to organised sectors, which is expanding the market for branded players.

Business strategy and outlook

The Company has been able to achieve higher volumes with higher margins but with lower prices resulting into less turnover in value terms. The prices of oil saw a decline during the year 2023-24 .The companys future looks promising backed by a good volume surge from the previous year that is projected to continue steadily and improve even further in the foreseeable future with stable range bound prices. Additionally, there are plans in place to create high-margin value added, health

At Kriti Nutrients, the company is well-prepared for this evolving market landscape. The pipeline today holds more prospective product candidates than ever before. Success in one product category has instilled confidence to venture into adjacent segments. Furthermore, theres promising traction from new products among institutional customers.

The Company is well geared to take the path of niche products in its array through marketing synergies, branding efforts ethical approach and geographical reach.

commitment is evident through the implementation of various software solutions such as SAP Enterprise Resource Planning System, CRM,

HRM, and sales force mobility. Notably, the integration of SAP HANA aims to

Information technology and digitalisation

The Company has been dedicated to leveraging information technology (IT) to boost operational efficiencies. This

elevate business analytics processes, fostering increased efficiency. Moving forward, the Company remains committed to ongoing investments in state-of-the-art technologies to align itself with global standards.

needed falls within the committees purview. They maintain open communication with both statutory and internal auditors, ensuring the effective operation of internal control systems.

Internal control systems and their adequacy

The Company consistently evaluates and enhances its internal audit system to safeguard assets, ensure

compliance with regulations and promptly resolve any outstanding issues. The audit committee regularly assesses reports furnished by internal auditors. Addressing audit observations and implementing remedial actions if

Human resources

The Company holds its skilled and trained workforce in high esteem, recognising them as indispensable for achieving organisational goals.

A commitment is made to not only maintain but also enhance their capabilities, ensuring they remain aligned with the ever-evolving technological landscape. During the year under review, the Company

undertook a variety of training initiatives covering a wide spectrum of topics. These encompassed technical competencies crucial for operational excellence, programs aimed at fostering positive behavioral traits, workshops focusing on enhancing business acumen, as well as both general and advanced management principles. Leadership training was provided to cultivate effective decisionmaking and team management skills. Customer-centric training was prioritised to uphold service standards, while safety protocols were reinforced to ensure a secure work environment. The Company emphasised the importance of values and ethical conduct, instilling a sense of integrity and responsibility across all levels of the workforce. The Company employed 230 as of 31st March, 2024.

Cautionary statement

The management discussion and analysis report containing the Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations.

The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors such as changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.